FULL answers to ECR Dec 2003 Gift Ltd
System
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I am posting all the answers to the above mentioned specimen covering Gift Ltd.<BR>If you find anything that may be wrong or you know other way to do it. Please do not hesitate to correct me.<BR>thanks<BR>Jhan<BR><BR><BR>SECTION A<BR><BR>TASK 1.1<BR><BR>Balance<BR><BR>Quantity kgs _________________Total Cost<BR><BR>4000_______________________£4800<BR><BR><BR>TASK 1.2<BR>Date................... Code........ Dr............. Cr<BR>6 Nov.................. 1000........ 22000 <BR>6 Nov.................. 3000........................ 22000<BR>11 Nov................ 1000........................ 16600<BR>11 Nov................ 1100........ 16600 <BR>17 Nov................ 1000........ 12000 <BR>17 Nov................ 3000........................ 12000<BR>19 Nov................ 1000........................ 22600<BR>19 Nov................ 1100........ 22600 <BR><BR><BR>TASK 1.3<BR><BR>Total Direct LAbour Hours....... 12000 x 6........ (Normal Rate) = £72000<BR>Overtime hours ...................... 4200 x 3 .........(O/T Premium Rate) = £4200 <BR><BR>Total cost of direct labour hours = 72000+4200 = £76200<BR><BR><BR><BR>TASK 1.4<BR><BR>Total______________Warehouse____________Manufacturing___________Sales__________Accounting<BR><BR>38275.................................6750..........................................12000........................7090.............................12435<BR><BR><BR>TASK 1.5<BR><BR>Budgeted fixed overhead absorptio rate=<BR><BR>Manufacturing Fixed Overheads..................... 12,000 <BR>
.......... =
= 0.60p <BR>Budgeted number of direct hours..................... 20,000 <BR><BR>TASK 1.6 <BR><BR>Pink Plastic.................................... 39,200<BR><BR>Direct Labour................................ 76,200 (task 1.3)<BR><BR>Manufacturing Overheads............. 7,200 (0.60 x 12000) F.o/h A R..x..actual hours (task 1.5)<BR><BR>Total cost of prodution...................122,600 (39200+76200+7200)<BR><BR>Number of Meg Rolls....................... 36,000<BR><BR>Unit Cost......................................... 3.41 (122600/36000)<BR><BR><BR>SECTION B<BR><BR>TASK 2.1<BR><BR>Product.......................................E.............................C.................................R<BR><BR>Selling Price per Unit...............30...........................40...............................60......... ( Sales Revenue/Prod. Units<BR><BR>Direct Meterials......................10..........................11...............................12............. (Direct Met. /Prod. Units)<BR><BR>Direct Labour..........................16..........................16................................20............. (Direct Labour/Prod. Units)<BR><BR>Varaible Overheads..................2.............................1.75.............................7 ...............(V Oheads/Prod Units)<BR><BR>Contribution Per Unit.................2...........................11.25.........................21............... (Selling price per Unit-(Met+Lab+VariableOverheads)<BR><BR>TASK 2.2<BR><BR>Fixed Cost <BR>
= Break Even<BR>Contribution<BR><BR>Hence...........................48000<BR>.................................
= 2400<BR>.......................................2<BR><BR>TASK 2.3<BR><BR>Product.......................................E......................C.................................R<BR><BR>Contribution per Unit...............2...................11.25...........................21......... ( task 2.1)<BR><BR>Machine hours Per Unit..........0.10.................0.15..............................0.35............ (machine hrs/prod units)<BR><BR>Contr. per machine hour..........20...................75................................60............. (Con. perUnit/Mach. Hr perunit)<BR><BR><BR><BR>TASK 2.4<BR><BR>Product..................................E.............................C.................................R<BR><BR>Sales & Prodution Units........0...........................1500.............................400........<BR><BR>MAchine Hours per month.....0.......................... ..225..............................140......<BR><BR>WROKINGS Task 2.4<BR><BR>As product C is ranking 1 because of high contribution per machine hour so it takes priority over R and E<BR><BR>Total Available Machine hours = 365<BR><BR>Product C =======1500x0.15=225 Hours ......................365-225=140 (available hours after Product C)<BR><BR>Product R ======= 140/0.35= 400 (Units)<BR><BR><BR>TASK 2.5<BR><BR>a)<BR> YEAR..............................Net Cash Flow (£000)............................................Commulutive Cash Flow(£000)<BR><BR>Y1.........................................(80).....................................................................................(80)<BR><BR>Y2...........................................15......................................................................................(65)<BR><BR>Y3...........................................25.....................................................................................(40)<BR><BR>Y4............................................80......................................................................................40<BR><BR>Y5...........................................25.......................................................................................65<BR><BR>The pay back period started from Year2 and the costs are repaid btween Year3 and Year4<BR><BR>By counting from Year2 it would make it repaid between Secound and Third Year of the available cash flow.<BR><BR>So it is 2 year and 40/80=0.5<BR>PAyback period is 2.5 years or <BR>2 years and (0.5x12=6) 6 months.<BR><BR><BR><BR>b)<BR>Present Value =net Cash Flow X present value factor<BR><BR>YEAR...........................Net Cash Flow (£000)..........Discount Factor..............................NPV(£000)<BR><BR>Y1.........................................(80)....................................0.909............................................(72.7)<BR><BR>Y2...........................................15.....................................0.826............................................12.39<BR><BR>Y3...........................................25.....................................0.751.............................................18.77<BR><BR>Y4...........................................80.....................................0.683..............................................54.64<BR><BR>Y5...........................................25......................................0.621.............................................15.52<BR><BR>
<BR><BR>.................................................................................................................................................28.61<BR><BR><BR>Based on the information provided this project returns positive NPV so the project is accepted.
.......... =
= 0.60p <BR>Budgeted number of direct hours..................... 20,000 <BR><BR>TASK 1.6 <BR><BR>Pink Plastic.................................... 39,200<BR><BR>Direct Labour................................ 76,200 (task 1.3)<BR><BR>Manufacturing Overheads............. 7,200 (0.60 x 12000) F.o/h A R..x..actual hours (task 1.5)<BR><BR>Total cost of prodution...................122,600 (39200+76200+7200)<BR><BR>Number of Meg Rolls....................... 36,000<BR><BR>Unit Cost......................................... 3.41 (122600/36000)<BR><BR><BR>SECTION B<BR><BR>TASK 2.1<BR><BR>Product.......................................E.............................C.................................R<BR><BR>Selling Price per Unit...............30...........................40...............................60......... ( Sales Revenue/Prod. Units<BR><BR>Direct Meterials......................10..........................11...............................12............. (Direct Met. /Prod. Units)<BR><BR>Direct Labour..........................16..........................16................................20............. (Direct Labour/Prod. Units)<BR><BR>Varaible Overheads..................2.............................1.75.............................7 ...............(V Oheads/Prod Units)<BR><BR>Contribution Per Unit.................2...........................11.25.........................21............... (Selling price per Unit-(Met+Lab+VariableOverheads)<BR><BR>TASK 2.2<BR><BR>Fixed Cost <BR>
= Break Even<BR>Contribution<BR><BR>Hence...........................48000<BR>.................................
= 2400<BR>.......................................2<BR><BR>TASK 2.3<BR><BR>Product.......................................E......................C.................................R<BR><BR>Contribution per Unit...............2...................11.25...........................21......... ( task 2.1)<BR><BR>Machine hours Per Unit..........0.10.................0.15..............................0.35............ (machine hrs/prod units)<BR><BR>Contr. per machine hour..........20...................75................................60............. (Con. perUnit/Mach. Hr perunit)<BR><BR><BR><BR>TASK 2.4<BR><BR>Product..................................E.............................C.................................R<BR><BR>Sales & Prodution Units........0...........................1500.............................400........<BR><BR>MAchine Hours per month.....0.......................... ..225..............................140......<BR><BR>WROKINGS Task 2.4<BR><BR>As product C is ranking 1 because of high contribution per machine hour so it takes priority over R and E<BR><BR>Total Available Machine hours = 365<BR><BR>Product C =======1500x0.15=225 Hours ......................365-225=140 (available hours after Product C)<BR><BR>Product R ======= 140/0.35= 400 (Units)<BR><BR><BR>TASK 2.5<BR><BR>a)<BR> YEAR..............................Net Cash Flow (£000)............................................Commulutive Cash Flow(£000)<BR><BR>Y1.........................................(80).....................................................................................(80)<BR><BR>Y2...........................................15......................................................................................(65)<BR><BR>Y3...........................................25.....................................................................................(40)<BR><BR>Y4............................................80......................................................................................40<BR><BR>Y5...........................................25.......................................................................................65<BR><BR>The pay back period started from Year2 and the costs are repaid btween Year3 and Year4<BR><BR>By counting from Year2 it would make it repaid between Secound and Third Year of the available cash flow.<BR><BR>So it is 2 year and 40/80=0.5<BR>PAyback period is 2.5 years or <BR>2 years and (0.5x12=6) 6 months.<BR><BR><BR><BR>b)<BR>Present Value =net Cash Flow X present value factor<BR><BR>YEAR...........................Net Cash Flow (£000)..........Discount Factor..............................NPV(£000)<BR><BR>Y1.........................................(80)....................................0.909............................................(72.7)<BR><BR>Y2...........................................15.....................................0.826............................................12.39<BR><BR>Y3...........................................25.....................................0.751.............................................18.77<BR><BR>Y4...........................................80.....................................0.683..............................................54.64<BR><BR>Y5...........................................25......................................0.621.............................................15.52<BR><BR>
<BR><BR>.................................................................................................................................................28.61<BR><BR><BR>Based on the information provided this project returns positive NPV so the project is accepted.
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